Insight and inspiration in turbulent times.
So, there you have it. Trump and his team have stumbled into a war they cannot win. If the war does not end soon, it will likely destroy the world economy for lack of energy supplies and plunge it into a deep, years-long depression, one from which it will be difficult to emerge.
The Peak Oil story got some things right.
A person often reads that low oil prices–for example, $30 per barrel oil prices–will stimulate the economy, and the economy will soon bounce back. What is wrong with this story? A lot of things, as I see it…
The Peak Oil story we have been told is wrong. The collapse in oil production comes from oil prices that are too low, not too high.
Both the stock market and oil prices have been plunging. Is this “just another cycle,” or is it something much worse? I think it is something much worse.
Our economy is like a pump that works increasingly slowly over time, as diminishing returns and other adverse influences affect its operation. Eventually, it is likely to stop.
The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP…
EIA, IEA, and BP forecasts miss the issue of low prices, and what they do to the possibility of future oil production. We get lulled into thinking that current prices are almost high enough, but they really are not. Companies really need to have enough funds on a cash flow basis, and on this basis they seem to need about $130 per barrel now, and more later. The likelihood of getting prices up to this high level seems very low.
Glut of Capital and Labor Challenge Policy Makers: Global oversupply extends beyond commodities, elevating deflation risk. To me, this is a very serious issue, quite likely signaling that we are reaching what has been called Limits to Growth…
Many readers have asked me to explain debt. They also ask: Why can’t we just cancel debt and start over? if we are reaching oil limits, and these limits threaten to destabilize the system.
There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt.
Academic researchers Carmen Reinhart and Kenneth Rogoff have become famous for their book This Time is Different: Eight Centuries of Financial Folly and their earlier paper This Time is Different: A Panoramic View of Eight Centuries of Financial Crises. Their point, of course, is that the same thing happens over and over again. We can learn from past crises to solve our current problems.
